Will DTEK50 Launch Boost BlackBerry Stock Price?

  • BlackBerry just released a new Android-based device called DTEK50.
  • The company claims that its the "most secure Android device" available in the market.
  • But marketing gimmicks aside, it's just a rebranded Alcatel phone that offers the same level of security as Priv.

Beleaguered smartphone vendor, BlackBerry (NSDQ:BBRY), just released a new Android-secured phone named DTEK50. The touchscreen device comes without a QWERTY keypad and sports a $299 price tag. The company is touting it as the most secure Android phone available in the market and projecting it as a potential game changer. But I’m not convinced.

Nothing new

Rewind to a few weeks ago and there were speculative reports and rumors that BlackBerry had outsourced the manufacturing of code-named Hamburg device which is currently known as DTEK50. The interesting thing about these reports was that they suggested the Hamburg device would be just a rebranding of the existing Alcatel Idol 4 smartphone. A lot of people couldn’t digest this part as BlackBerry has been known to design its own smartphones, so the speculative reports were largely discredited.

But this week, when the BlackBerry DTEK50 was revealed, it became clear that the rumors were bang on. The smartphone is almost a mirror copy of Alcatel Idol 4 indeed. The only differentiating factor between the two devices is that the DTEK50 sports a minor CPU bump, back cover and branding are different and the OS is BlackBerry’s secured version of Android that comes with a few proprietary apps like DTEK.

The Canadian smartphone vendor probably licensed a reference design from Alcatel and gave the manufacturing contract to TCL in order to save R&D costs associated with designing a phone. This makes a lot of financial sense as BlackBerry is aiming to achieve handset profitability this year. At the same time, it is disappointing to see that BlackBerry couldn’t design its own phone according to its consumer demands.

It has been about 10 months since BlackBerry released its last phone, Priv. This was more than enough time to do market research, see what the consumers want, and then design a phone accordingly. But BlackBerry’s decision to license a reference design, after waiting for 10 months, seems like a painfully slow decision. If the management is wanting to proceed with licensing, it should swiftly chop off its old smartphone lines and replace them with more reference design-based smartphones.

The company could outsource its device manufacturing to third party ODMs such as Foxconn, Wistron or TCL so the burden of fixed costs associated with device manufacturing won’t fall on BlackBerry anyway. But the management needs to act on it quickly.

Security

It's worth noting that the DTEK50 is positioned as a fleet device and not a premium offering. The Priv is too expensive for companies to be distributing it to their employees in large numbers, but BlackBerry management believes that DTEK50’s relatively reasonable price tag should promote its pickup in corporations and governments. This is all fine, but BlackBerry goes on to say that its fleet device is “the most secure Android” available in the market currently.

Screen Shot 2016-07-28 at 12.21.49 AM

(Source: YouTube)

This is like saying that the high-end Priv isn’t as secure as the $300 DTEK50. I find this statement hard to digest as both Priv and DTEK50 run the same operating systems and software features that are baked-in by BlackBerry. The DTEK50 doesn’t sport any new hardware-level security features either. If anything, the Priv comes with a premium and better set of hardware and electronic components.

So if you don’t have any new hardware-level security, and you have the same set of software running on the two devices, you can’t really call one of the devices as “more secured.” If the DTEK50 truly had some ground breaking software-level security features baked in, won’t BlackBerry just push an update for Priv and make its security profile as robust as well? I mean, BlackBerry doesn’t really benefit from releasing a mid-range device that trumps its high-end offering in security after all.

This appears to be some kind of a marketing gimmick to attract the eyeballs of technology enthusiasts and potential consumers. Until BlackBerry openly explains about what’s different in the two devices security-wise, its bold claim of DTEK50 being “the most secure” device can’t be taken seriously.

Market premium

The biggest complaint with BlackBerry in the past has been that the smartphone vendor prices its devices a bit too high. This has largely limited the adoption of its devices by the mass market. For instance, BlackBerry Classic is priced at a whopping $415 in India even though the device has been discontinued. That is a steep price for a device that is no longer being manufactured.

When BlackBerry was designing its own phones, and powering them with its relatively secure BB10 operating system, it had some sort of pricing power. But now that the company is just rebranding an Alcatel phone and reinforcing the Android OS security-wise, it doesn’t have much pricing power left.

Coming back to DETK50, it is priced at $300 while a similar-spec Moto G4 costs just about $180. BlackBerry needs to realize that it can’t command a big market premium anymore. If the company wants its devices to be adopted by the mass market, then it needs to price its products more competitively.

I feel that DTEK50’s price could have been lower by at least 15-20% to make it a compelling buy for the mass market.

Investors takeaway

I’m of the opinion that BlackBerry’s decision to license the hardware design for DTEK50 is a great way for it to reduce R&D expenses. But I also feel that the company needs to pick up pace and release more devices like this soon and at competitive price points. It needs to shed devices that aren’t selling well (BB10 devices) and replace them with handsets that consumers truly want. Only then can it succeed.

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